If we are to predict what decentralized exchanges hold for the future, we have to look into the past. In Robert A. Heinlein’s words, a generation which ignores history has no past and future.
What is a Decentralised Exchange?
A Decentralized Exchange (DEX) is a cryptocurrency exchange that allows direct cryptocurrency transactions. These transactions are executed online without the need of an intermediary or middleman. The middleman is eliminated and substituted with a tech-driven system using blockchain. The system protects the information from infiltration, hacking and hijacking.
A DEX is one of many different types of blockchain networks available.
This kind of blockchain is used by Bitcoin. It eradicates the issue of centralized operations and introduces decentralized operations. This means, operations on this platform are not executed from any source administration. Public blockchain is truly public, open to everyone.
As the name implies, it is private. It is restricted to a particular group of people per time, say a company or an organization.
It’s a combination of a public and a private blockchain. It allows organizations to have a public system as well as a restricted system. This helps to control who has access to what and which information is available to everyone.
This is also known as a “Federated Blockchain”. It has both private and public blockchains like the hybrid blockchain. But here, the blockchain is not used by only a group of people. It is used by many organizational members who have an agreement.
Some of the most recognizable blockchains fall under the public blockchain. Even if you are new to the crypto world, you must have stumbled on them a few times. Common cryptos that use public blockchains are Bitcoin, Litecoin and Ethereum.
What do Blockchains Store?
Take Ethereum as an example. The Ethereum blockchain stores all data about Ethereum from the emergence of Ethereum in 2015 until this very moment. This data includes the entire history of all cryptocurrency transactions. Transactions fall into blocks and each block is added to previous blocks to form a chain. This chain is encrypted.
For a few years now, it’s no longer news that DEX has been the craze of almost all finance media. Here are some of the areas decentralized exchange advances us into the future.
A prevailing issue to the internet age is data privacy. Many centralised systems are easy to breach and as a result, data protection is difficult.
A decentralized system is the opposite of this. Data is kept safely and secure from prying eyes. Access is given to whom it is due and as when needed. Protection of identities and secured transactions is achieved with DEX.
Easy International Trade
The processes of cross-border transactions are often complex. Globally, financial institutions all function on centralized systems. Have you ever thought of banks functioning like the Bitcoin blockchain? A decentralized exchange that is transparent, reliable and smooth running?
The benefits are endless. There is faster trading, it is secure, it is simpler.
Everyone invests, saves and banks. Isn’t it funny that you save your hard-earned money in the bank and still have issues withdrawing it? Sometimes, due to banking delays, it’s like you have to put your projects on hold.
Thanks to blockchain technology, projects can now be funded with the adoption of a decentralized system at will.
Yes, banks still operate on the centralized system. But using DEX you can seamlessly fund your project anywhere in the world with zero third party needed. There is a need to transition from centralized exchange into decentralized exchange. We must harness the full potential DEX has to offer so we can all live in a future with more ease.